{"id":318,"date":"2015-05-04T15:04:48","date_gmt":"2015-05-04T15:04:48","guid":{"rendered":"https:\/\/courses.candelalearning.com\/masterymacro1xngcxmaster\/?post_type=chapter&#038;p=318"},"modified":"2024-04-26T03:17:44","modified_gmt":"2024-04-26T03:17:44","slug":"calculating-unemployment","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-macroeconomics\/chapter\/calculating-unemployment\/","title":{"raw":"Who Counts in Unemployment?","rendered":"Who Counts in Unemployment?"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Objectives<\/h3>\r\n<ul>\r\n \t<li>Define and differentiate between employed, unemployed, and being in or out of the labor force<\/li>\r\n<\/ul>\r\n<\/div>\r\n<h2>The Cost of Unemployment<\/h2>\r\nUnemployment can be a terrible and wrenching life experience\u2014like a serious automobile accident or a messy divorce\u2014whose consequences can be fully understood only by someone who has gone through it. For unemployed individuals and their families, there is the day-to-day financial stress of not knowing where the next paycheck is coming from. There are painful adjustments, like watching your savings account dwindle, selling a car and buying a cheaper one, or moving to a less expensive place to live. Even when the unemployed person finds a new job, it may pay less than the previous one. For many people, their job is an important part of their self worth. When unemployment separates people from the workforce, it can affect family relationships as well as mental and physical health.\r\n\r\nThe human costs of unemployment alone would justify making a low level of unemployment an important public policy priority. But unemployment also includes economic costs to the broader society. When millions of unemployed but willing workers cannot find jobs, an economic resource is going unused. An economy with high unemployment is like a company operating with a functional but unused factory. The opportunity cost\u00a0of unemployment is the output that could have been produced by the unemployed workers.\r\n<h2>Calculating Unemployment<\/h2>\r\nUnemployment is typically described in newspaper or television reports as a percentage or a rate. A report might say, for example, <span class=\"emphasis\">from January 2013\u00a0to December\u00a02013, the U.S. unemployment rate dropped\u00a0from 8.0% to 6.7%, and\u00a0by the close of 2015, it had fallen to 5.0%<\/span>. At a glance, the changes between the percentages may seem small. But remember that the U.S. economy has over 160 million adults who either have jobs or are looking for them. A rise or fall of just 0.1% in the unemployment rate of 160 million potential workers translates into 160,000 people, which is roughly the total population of a city like Syracuse, New York, Brownsville, Texas, or Pasadena, California. Large rises in the unemployment rate mean large numbers of job losses. The decrease in unemployment from 8% in 6.7% 2013\u00a0meant an additional 2.02\u00a0million people were employed who had previously been looking for work.\r\n<div class=\"bcc-box bcc-info\">\r\n<h3>Link It Up<\/h3>\r\nThe <a class=\"link\" href=\"https:\/\/www.bls.gov\/bls\/unemployment.htm\" target=\"_blank\" rel=\"noopener\">Bureau of Labor Statistics<\/a> tracks and reports all data related to unemployment.\r\n\r\n<\/div>\r\n<div class=\"section\" title=\"Who\u2019s In or Out of the Labor Force?\">\r\n<div class=\"titlepage\">\r\n<div>\r\n<div>\r\n<h2 id=\"m48720-fs-idm28087104\"><span class=\"cnx-gentext-section cnx-gentext-t\">Who\u2019s In or Out of the Labor Force?<\/span><\/h2>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\nShould everyone without a job be counted as unemployed? Of course not. Children, for example, should not be counted as unemployed. Surely, the retired should not be counted as unemployed. Many full-time college students have only a part-time job, or no job at all, but it seems inappropriate to count them as suffering the pains of unemployment. Some people are not working because they are rearing children, ill, on vacation, or on parental leave.\r\n<div class=\"textbox examples\">\r\n<h3>watch It<\/h3>\r\nLearn about what constitutes the labor force in this short video:\r\n\r\n<iframe src=\"https:\/\/www.youtube.com\/embed\/_CdTu1pk06w?list=PLF2A3693D8481F442\" width=\"853\" height=\"480\" frameborder=\"0\"><\/iframe>\r\n\r\nYou can view the <a href=\"https:\/\/oerfiles.s3-us-west-2.amazonaws.com\/Macroeconomics\/Transcriptions\/MacroEpisode18Unemployment_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for \"(Macro) Episode 18: Unemployment\" here (opens in new window)<\/a>.\r\n\r\n<\/div>\r\nThe point is that the adult population is not just divided into employed and unemployed. A third group exists: people who do not have a job, and for some reason\u2014retirement, looking after children, taking a voluntary break before a new job\u2014are not interested in having a job, either. It also includes those who do want a job but have quit looking, often due to being discouraged by their inability to find suitable employment. Economists refer to this third group of those who are not working and not looking for work as <strong>out of the labor force<\/strong>.\r\n\r\n[caption id=\"attachment_6563\" align=\"aligncenter\" width=\"525\"]<img class=\"wp-image-6563\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/2043\/2015\/05\/15154914\/umeply.png\" alt=\"Pie chart showing 151.4 million employed, 7.7 unemployed and 94.4 out of the labor force.\" width=\"525\" height=\"315\" \/> <strong>Figure 1. Employed, Unemployed, and Out of the Labor Force Distribution of Adult Population (age 16 and older), 2016.<\/strong> The total adult, working-age population in 2016 was 253.5 million. Out of this total population, 151.4 million were classified as employed and 7.7 million were classified as unemployed. The remaining 94.4 million were classified as out of the labor force. As you will learn, however, this seemingly simple chart does not tell the whole story.[\/caption]\r\n\r\nThe U.S. unemployment rate, which is based on a monthly survey carried out by the U.S. Bureau of the Census, asks a series of questions to divide up the adult population into employed, unemployed, or not in the labor force. To be classified as unemployed, a person must be without a job, currently available to work, and actively looking for work in the previous four weeks. Thus, a person who does not have a job but who is not currently available to work or has not actively looked for work in the last four weeks is counted as out of the labor force.\r\n<ul>\r\n \t<li><strong>Employed<\/strong>: currently working for pay<\/li>\r\n \t<li><strong>Unemployed<\/strong>: Out of work and actively looking for a job<\/li>\r\n \t<li><strong>Out of the labor force<\/strong>: Out of paid workforce and\/or not actively looking for a job<\/li>\r\n \t<li><strong>Labor force<\/strong>: the number of employed plus the unemployed<\/li>\r\n<\/ul>\r\n<div class=\"textbox tryit\">\r\n<h3>Try It<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/c70b2f4a-37b6-45d2-9384-f2eb1132f0d2\r\n\r\nhttps:\/\/assess.lumenlearning.com\/practice\/7471e5d8-daa3-4685-8354-a793e7aabf91\r\n\r\n<\/div>\r\n<\/div>\r\n<div id=\"m48720-fs-idp183082448\" class=\"equation\" title=\"Equation\u00a07.4.\u00a0\">\r\n<div class=\"section\" title=\"How Is the U.S. Unemployment Data Collected?\">\r\n<div class=\"body\">\r\n<div class=\"section\" title=\"Criticisms of Measuring Unemployment\">\r\n<div class=\"textbox learning-objectives\">\r\n<h3>Glossary<\/h3>\r\n[glossary-page][glossary-term]discouraged workers: [\/glossary-term]\r\n[glossary-definition]those who have stopped looking for employment due to the lack of suitable positions available[\/glossary-definition]\r\n[glossary-term]out of the labor force: [\/glossary-term]\r\n[glossary-definition]those who are not working and not looking for work\u2014whether they want employment or not; also termed \u201cnot in the labor force\u201d[\/glossary-definition][glossary-term]underemployed: [\/glossary-term][glossary-definition]individuals who are employed in a job that is below their skills[\/glossary-definition][\/glossary-page]\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Objectives<\/h3>\n<ul>\n<li>Define and differentiate between employed, unemployed, and being in or out of the labor force<\/li>\n<\/ul>\n<\/div>\n<h2>The Cost of Unemployment<\/h2>\n<p>Unemployment can be a terrible and wrenching life experience\u2014like a serious automobile accident or a messy divorce\u2014whose consequences can be fully understood only by someone who has gone through it. For unemployed individuals and their families, there is the day-to-day financial stress of not knowing where the next paycheck is coming from. There are painful adjustments, like watching your savings account dwindle, selling a car and buying a cheaper one, or moving to a less expensive place to live. Even when the unemployed person finds a new job, it may pay less than the previous one. For many people, their job is an important part of their self worth. When unemployment separates people from the workforce, it can affect family relationships as well as mental and physical health.<\/p>\n<p>The human costs of unemployment alone would justify making a low level of unemployment an important public policy priority. But unemployment also includes economic costs to the broader society. When millions of unemployed but willing workers cannot find jobs, an economic resource is going unused. An economy with high unemployment is like a company operating with a functional but unused factory. The opportunity cost\u00a0of unemployment is the output that could have been produced by the unemployed workers.<\/p>\n<h2>Calculating Unemployment<\/h2>\n<p>Unemployment is typically described in newspaper or television reports as a percentage or a rate. A report might say, for example, <span class=\"emphasis\">from January 2013\u00a0to December\u00a02013, the U.S. unemployment rate dropped\u00a0from 8.0% to 6.7%, and\u00a0by the close of 2015, it had fallen to 5.0%<\/span>. At a glance, the changes between the percentages may seem small. But remember that the U.S. economy has over 160 million adults who either have jobs or are looking for them. A rise or fall of just 0.1% in the unemployment rate of 160 million potential workers translates into 160,000 people, which is roughly the total population of a city like Syracuse, New York, Brownsville, Texas, or Pasadena, California. Large rises in the unemployment rate mean large numbers of job losses. The decrease in unemployment from 8% in 6.7% 2013\u00a0meant an additional 2.02\u00a0million people were employed who had previously been looking for work.<\/p>\n<div class=\"bcc-box bcc-info\">\n<h3>Link It Up<\/h3>\n<p>The <a class=\"link\" href=\"https:\/\/www.bls.gov\/bls\/unemployment.htm\" target=\"_blank\" rel=\"noopener\">Bureau of Labor Statistics<\/a> tracks and reports all data related to unemployment.<\/p>\n<\/div>\n<div class=\"section\" title=\"Who\u2019s In or Out of the Labor Force?\">\n<div class=\"titlepage\">\n<div>\n<div>\n<h2 id=\"m48720-fs-idm28087104\"><span class=\"cnx-gentext-section cnx-gentext-t\">Who\u2019s In or Out of the Labor Force?<\/span><\/h2>\n<\/div>\n<\/div>\n<\/div>\n<p>Should everyone without a job be counted as unemployed? Of course not. Children, for example, should not be counted as unemployed. Surely, the retired should not be counted as unemployed. Many full-time college students have only a part-time job, or no job at all, but it seems inappropriate to count them as suffering the pains of unemployment. Some people are not working because they are rearing children, ill, on vacation, or on parental leave.<\/p>\n<div class=\"textbox examples\">\n<h3>watch It<\/h3>\n<p>Learn about what constitutes the labor force in this short video:<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/_CdTu1pk06w?list=PLF2A3693D8481F442\" width=\"853\" height=\"480\" frameborder=\"0\"><\/iframe><\/p>\n<p>You can view the <a href=\"https:\/\/oerfiles.s3-us-west-2.amazonaws.com\/Macroeconomics\/Transcriptions\/MacroEpisode18Unemployment_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for &#8220;(Macro) Episode 18: Unemployment&#8221; here (opens in new window)<\/a>.<\/p>\n<\/div>\n<p>The point is that the adult population is not just divided into employed and unemployed. A third group exists: people who do not have a job, and for some reason\u2014retirement, looking after children, taking a voluntary break before a new job\u2014are not interested in having a job, either. It also includes those who do want a job but have quit looking, often due to being discouraged by their inability to find suitable employment. Economists refer to this third group of those who are not working and not looking for work as <strong>out of the labor force<\/strong>.<\/p>\n<div id=\"attachment_6563\" style=\"width: 535px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-6563\" class=\"wp-image-6563\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/2043\/2015\/05\/15154914\/umeply.png\" alt=\"Pie chart showing 151.4 million employed, 7.7 unemployed and 94.4 out of the labor force.\" width=\"525\" height=\"315\" \/><\/p>\n<p id=\"caption-attachment-6563\" class=\"wp-caption-text\"><strong>Figure 1. Employed, Unemployed, and Out of the Labor Force Distribution of Adult Population (age 16 and older), 2016.<\/strong> The total adult, working-age population in 2016 was 253.5 million. Out of this total population, 151.4 million were classified as employed and 7.7 million were classified as unemployed. The remaining 94.4 million were classified as out of the labor force. As you will learn, however, this seemingly simple chart does not tell the whole story.<\/p>\n<\/div>\n<p>The U.S. unemployment rate, which is based on a monthly survey carried out by the U.S. Bureau of the Census, asks a series of questions to divide up the adult population into employed, unemployed, or not in the labor force. To be classified as unemployed, a person must be without a job, currently available to work, and actively looking for work in the previous four weeks. Thus, a person who does not have a job but who is not currently available to work or has not actively looked for work in the last four weeks is counted as out of the labor force.<\/p>\n<ul>\n<li><strong>Employed<\/strong>: currently working for pay<\/li>\n<li><strong>Unemployed<\/strong>: Out of work and actively looking for a job<\/li>\n<li><strong>Out of the labor force<\/strong>: Out of paid workforce and\/or not actively looking for a job<\/li>\n<li><strong>Labor force<\/strong>: the number of employed plus the unemployed<\/li>\n<\/ul>\n<div class=\"textbox tryit\">\n<h3>Try It<\/h3>\n<p>\t<iframe id=\"assessment_practice_c70b2f4a-37b6-45d2-9384-f2eb1132f0d2\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/c70b2f4a-37b6-45d2-9384-f2eb1132f0d2?iframe_resize_id=assessment_practice_id_c70b2f4a-37b6-45d2-9384-f2eb1132f0d2\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe><\/p>\n<p>\t<iframe id=\"assessment_practice_7471e5d8-daa3-4685-8354-a793e7aabf91\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/7471e5d8-daa3-4685-8354-a793e7aabf91?iframe_resize_id=assessment_practice_id_7471e5d8-daa3-4685-8354-a793e7aabf91\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe><\/p>\n<\/div>\n<\/div>\n<div id=\"m48720-fs-idp183082448\" class=\"equation\" title=\"Equation\u00a07.4.\u00a0\">\n<div class=\"section\" title=\"How Is the U.S. Unemployment Data Collected?\">\n<div class=\"body\">\n<div class=\"section\" title=\"Criticisms of Measuring Unemployment\">\n<div class=\"textbox learning-objectives\">\n<h3>Glossary<\/h3>\n<div class=\"titlepage\">\n<dl>\n<dt>discouraged workers: <\/dt>\n<dd>those who have stopped looking for employment due to the lack of suitable positions available<\/dd>\n<dt>out of the labor force: <\/dt>\n<dd>those who are not working and not looking for work\u2014whether they want employment or not; also termed \u201cnot in the labor force\u201d<\/dd>\n<dt>underemployed: <\/dt>\n<dd>individuals who are employed in a job that is below their skills<\/dd>\n<\/dl>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-318\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Modification, adaptation, and original content. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>How Economists Define and Compute Unemployment Rate. <strong>Authored by<\/strong>: OpenStax College. <strong>Provided by<\/strong>: Rice University. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/cnx.org\/contents\/vEmOH-_p@4.44:rrKevL6Q\/How-Economists-Define-and-Comp\">https:\/\/cnx.org\/contents\/vEmOH-_p@4.44:rrKevL6Q\/How-Economists-Define-and-Comp<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em>. <strong>License Terms<\/strong>: Download for free at http:\/\/cnx.org\/contents\/bc498e1f-efe9-43a0-8dea-d3569ad09a82@4.44<\/li><li>(Macro) Episode 18: Unemployment. <strong>Authored by<\/strong>: Dr. Mary McGlasson. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.youtube.com\/watch?v=_CdTu1pk06w&#038;index=18&#038;list=PLF2A3693D8481F442\">https:\/\/www.youtube.com\/watch?v=_CdTu1pk06w&#038;index=18&#038;list=PLF2A3693D8481F442<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-nd\/4.0\/\">CC BY-NC-ND: Attribution-NonCommercial-NoDerivatives <\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":74,"menu_order":3,"template":"","meta":{"_candela_citation":"[{\"type\":\"cc\",\"description\":\"How Economists Define and Compute Unemployment Rate\",\"author\":\"OpenStax College\",\"organization\":\"Rice University\",\"url\":\"https:\/\/cnx.org\/contents\/vEmOH-_p@4.44:rrKevL6Q\/How-Economists-Define-and-Comp\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"Download for free at http:\/\/cnx.org\/contents\/bc498e1f-efe9-43a0-8dea-d3569ad09a82@4.44\"},{\"type\":\"cc\",\"description\":\"(Macro) Episode 18: Unemployment\",\"author\":\"Dr. Mary McGlasson\",\"organization\":\"\",\"url\":\"https:\/\/www.youtube.com\/watch?v=_CdTu1pk06w&index=18&list=PLF2A3693D8481F442\",\"project\":\"\",\"license\":\"cc-by-nc-nd\",\"license_terms\":\"\"},{\"type\":\"original\",\"description\":\"Modification, adaptation, and original content\",\"author\":\"\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"3c9a50a2-f369-4ab8-b603-7d1eab9c19f6, 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